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Earnings Season Update

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What’s in Today’s Report:

  • Earnings Season Update (Not Great, But Not Bad, Either)
  • What’s Up With Natural Gas?

Futures are flat as concern about the Wuhan coronavirus offset better than expected earnings.

Chinese authorities expanded the quarantine zone around Wuhan to limit the transmission of the disease, and that’s increasing fears of a bigger negative economic impact.

Earnings overnight were solid as TXN beat estimates,  boosting semi-conductors and tech more generally.

Today we get an ECB Announcement, but no change in rates is expected and really markets will just want to hear a dovish tone from new ECB President Lagarde (which should happen).

Away from the ECB,  Jobless Claims (E: 213K) is the key economic report, while earnings season continues to roll on.  Some reports we’re watching today include: PG (E: $1.37) and INTC (E: $1.24).

What the Wuhan Coronavirus Means for Markets

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What’s in Today’s Report:

  • What the Wuhan Coronavirus Means for Markets

S&P 500 futures rallied to new record highs overnight amid easing concerns over the deadly virus outbreak in China that weighed on risk assets Tuesday.

Chinese health officials announced plans to both screen for, and contain the Wuhan coronavirus which helped reduce fears that a SARS-like epidemic is developing.

Today, there are a few different potential catalysts for the market that warrant watching. First, there are two economic reports on the housing market: FHFA House Price Index (E: 0.3%) and Existing Home Sales (E: 5.430M) which should show a continued rebound in the sector into the end of 2019.

Second, earnings season is in full swing and investors will continue to sift through the releases closely. Notable corporations reporting today include: JNJ ($1.87), ABT ($0.95), ALLY ($0.95), TXN ($1.02), KMI ($0.26), LVS ($0.80), and RJF ($1.90).

Lastly, any new developments on the spread, or containment of, the Wuhan coronavirus will likely get a reaction from markets as it was the primary focus of traders across asset classes yesterday.

The Two Pillars Supporting Stocks

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What’s in Today’s Report:

  • Staying Focused on the Two Causes of the Rally

U.S. stock futures and European shares are tracking Asian markets lower amid rising concerns about the outbreak of a newly discovered virus in China.

Chinese health officials have confirmed that the recently named “coronavirus” can be spread by human-to-human contact.

And with the Lunar New Year holiday beginning this week, fears of a SARS-like health epidemic are on the rise which saw the Shanghai Composite fall 1.41% overnight.

Looking into today’s session, there are no notable economic reports due to be released and no Fed officials are scheduled to speak.

That will leave investors largely focused on Q4 earnings season with HAL ($0.29) reporting before the bell and NFLX ($0.50), AMTD ($0.76), UAL ($2.64), and COF ($2.38) all releasing results after the close.

The First Two Important Events of the Year (Both This Week)

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What’s in Today’s Report:

  • The First Two Important Events of 2020 (Both This Week)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Important Updates on Growth)

Futures are moderately higher following a quiet weekend and ahead of two important events this week:  Phase one signing ceremony (Wed) and the start of earnings season.  Futures are essentially recouping Friday’s losses.

U.S./China trade optimism is helping stocks rally as the U.S. and China will resume semi-annual meetings, something that was done in the Bush/Obama administrations.   This doesn’t impact trade directly, but just like in 2019, any generically positive U.S./China headline will result in at least a mild rally.

Economic data was soft as British GDP (-0.3% vs. (E) 0.0%) and manufacturing (-1.7% vs. (E) -0.3%) both missed estimates, although the soft data is only weighing on the Pound.

Today there are no notable economic reports and just two Fed speakers, Rosengren (10:00 a.m. ET) and Bostic (12:40 a.m. ET), and they won’t move markets.  So, investors will be looking for any hints as to what will be released at the U.S./China phase one signing ceremony on Wednesday, and the more specifics, the better.

Jobs Day

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What’s in Today’s Report:

  • Key Levels To Watch in the Dollar Index and 10 Year Yield (Post Jobs Report)
  • Jobs Report Preview (Abbreviated Version)

Futures are solidly higher again following another quiet night as momentum continues to push the market to fresh highs, ahead of the jobs report.

There was no new geopolitical news overnight and international focus has now turned to whether the Ukrainian flight was hit by an Iranian missile.  That shift in focus is helping tensions to recede further.

Economic data was sparse as Japanese Household Spending missed estimates while Aussie Retail Sales beat expectations, but neither number is moving markets.

Today the key number is the Jobs Report, and expectations are as follows:  Jobs 158K, UE Rate 3.5%, Wages 0.3%/3.1%.  The key number is the wage data, but unless we see wages spike close to, or above 3.5% y/y, then the jobs report shouldn’t derail the rally.

Four Events that Could Cause a Correction

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What’s in Today’s Report:

  • Four Events that Could Cause a Correction

Futures are drifting cautiously higher this morning while international markets rallied overnight thanks to more upbeat economic data amid a static geopolitical backdrop.

There were no material developments regarding tensions between the U.S. and Iran overnight.

Economically, a Eurozone inflation reading (HICP) met expectations for the month of December while EU Retail Sales rose 1.0% in November, topping estimates of 0.6%.

Today, there are three economic reports to watch: International Trade (E: -$43.9B), Factory Orders (E: -0.7%), and the ISM Non-Manufacturing Index (E: 54.5). No Fed officials are scheduled to speak.

As far as other catalysts go, the Treasury will hold a 3-Yr. Note Auction at 1:00 p.m. ET and the results could move bond yields and have an impact on the yield curve. And if the curve compresses further (it has narrowed by more than 10 basis points over the last week), it could begin to pressure stocks.

Lastly, tensions between the U.S. and Iran remain a major market focus right now and further escalation could also weigh on risk assets, however, no news is good news regarding the situation right now, so if things continue to calm down in the Middle East, stocks could continue to drift back towards all-time highs.

Melt Up

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What’s in Today’s Report:

  • Year-End Melt Up:  Why Stocks Are Rallying Off Recycled Headlines
  • Weekly Jobless Claims:  Retracing the Thanksgiving Spike

Futures are modestly higher yet again following another quiet night of news as the melt-up continues into year-end.

Chinese Industrial Profits rose 5.4% in November, the first gain in three months, and this headline is mostly responsible for the gain in futures this morning.

Other economic data was mixed, as Japanese Industrial Production (-0.9% vs. (E) -1.4%) and Unemployment (2.2% vs. (E) 2.4%) beat estimates, while Retail Sales slightly missed (-2.1% vs. (E) -1.7%).

Today there are no notable economic reports nor any Fed speakers, and if should be a generally quiet day.

What a Difference a Year Can Make

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What’s in Today’s Report:

  • What A Difference a Year Can Make:  December 26th 2018 vs. December 26th 2019

Futures are marginally higher following a good report on retail sales by Mastercard.  Trading is quiet, however, as most of Europe, Hong Kong and Australia are closed for Boxing Day.

Mastercard (MA) posted preliminary estimates for 2019 holiday spending and they appear stronger than expectations, and that’s helping send futures higher.

There was no “Christmas surprise” from North Korea although a missile launch is still expected in the coming days (but even if it happens, it shouldn’t impact markets much).

The only notable number out today is Jobless Claims (E: 223K), and we’ll want to see the continued unwind of the Thanksgiving spike higher in claims that occurred two weeks ago.

Time to Buy Defense Stocks?

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What’s in Today’s Report:

  • Was that the Bottom in Boeing? (Time to Buy Defense Stocks?)
  • Durable Goods Takeaways (Not as Bad as It Appeared)

U.S. stock futures are marginally higher this morning while international markets were little changed overnight as news wires were very quiet and attendance is notably thin ahead of the Christmas holiday.

There were no economic reports overnight and no market-moving headlines have crossed since yesterday’s close.

Looking into today’s holiday-shortened session (the NYSE will close at 1:00 p.m. ET), there are no notable economic releases and no Fed officials are scheduled to speak.

The only potential market catalyst on the calendar is a 5-Yr Note Auction by the Treasury at 10:00 a.m. ET. Any significant moves in the belly of the yield curve could affect stocks today as computer trading will dominate the price action due to the low attendance ahead of Christmas.

If There’s a Pullback, Where Is Support? (Technical Update)

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What’s in Today’s Report:

  • If There’s a Pullback in Early 2020, Where Is Support? (Technical Update)

Futures are little changed this morning following another quiet night of news as markets digest the Q4 gains.

On trade, the House of Representatives passed the USMCA, as was widely expected and already priced in.

Economic data was largely in-line as Japanese CPI (0.5%) and German GfK Consumer Climate (9.7 vs. (E) 9.6) both met expectations.

Today focus will remain on economic data, and we have several more notable reports including, in order of importance: Core PCE Price Index (E: 0.2%), Consumer Sentiment (E: 99.2), Final Q3 ‘19 GDP (E: 2.1%).  The Core PCE Price Index, which is the Fed’s preferred measure of inflation, needs to continue to show subdued inflation pressures, as a sudden surge in inflation is the only thing that could get the Fed to become more hawkish.  Finally, today is a quadruple witching options expiration so don’t be shocked if there’s elevated volumes and some volatility into the close.